Moldauer v Constellation Brands Inc

[2013] SASC 38

Supreme Court of South Australia

(Appeal from a Master)

MOLDAUER v CONSTELLATION BRANDS INC

[2013] SASC 38

Judgment of The Honourable Chief Justice Kourakis (ex tempore)

22 February 2013

APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS

PRIVATE INTERNATIONAL LAW - RESTRAINT OF PROCEEDINGS - OF LOCAL PROCEEDINGS: CLEARLY INAPPROPRIATE FORUM - GENERALLY

The appellant appeals against an order permanently staying the action brought by him in this Court against the respondent. The action was stayed by a Master of this Court on the ground that this Court was a clearly inappropriate forum. The appellant was employed by, and worked for the respondent in California, USA. The appellant claims damages for non payment of wages, under what he claims is an extant contract of employment with the respondent. The respondent contends that the appellant’s employment was terminated in accordance with terms recorded in an agreement referred to as ‘the severance agreement’. The respondent is a foreign company registered under the Corporations Act 2001 (Cth). It has significant shareholdings in other companies in Australia, but it does not conduct business in this country. On appeal, the matter for determination is whether this Court is a clearly inappropriate forum for the determination of the dispute.

Held: appeal dismissed – this Court is a clearly inappropriate forum having regard to the legal issues to be determined, the location of witnesses and the costs of litigating the matter in Australia.

Corporations Act 2001 (Cth), referred to.
Voth v Manildra Flour Mills Pty Ltd (1991) 171 CLR 538; Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460; McGregor v Potts (2005) 68 NSWLR 109; Garsec v His Majesty The Sultan of Brunei & Anor (2007) 213 FLR 331; Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577; FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association & Anor (1997) 41 NSWLR 117, considered.

MOLDAUER v CONSTELLATION BRANDS INC
[2013] SASC 38

Appeal from a Master

1. KOURAKIS CJ (ex tempore):      The appellant, Mr Moldauer, appeals against an order permanently staying the action brought by him in this Court on 4 April 2012 against the respondent, Constellation Brands, Inc (CBI).  The action was stayed by a Master of this Court on the ground that this Court is a plainly inappropriate forum.

2. Mr Moldauer claims damages for non payment of wages, under what he claims is an extant contract of employment with CBI. Mr Moldauer was employed by and worked for CBI in California as a senior cost analyst between September 2000 and October 2002.  Mr Moldauer pleads that he was not assigned work duties thereafter even though he was ready, willing and able to perform them.  Mr Moldauer seeks an award compensating him for his unpaid salary from October 2002 to the date of judgment.

3. CBI, by its defence, contends that Mr Moldauer’s employment was terminated in accordance with terms recorded in an agreement dated 1 November 2002, and referred to as ‘the severance agreement’.  The severance agreement on its face was made between ‘Canandaigua Wine Company’ and Mr Moldauer. There were no post nominals recorded after the words ‘Canandaigua Wine Company’ to indicate its incorporation.

4. Mr Moldauer contends that the description ‘Canandaigua Wine Company’ is a reference to another corporate entity, the Canandaigua Wine Company Incorporated, which is related to CBI.  CBI contends that ‘Canandaigua Wine Company’ is its registered trade name in the United States.

5. Given that it is common ground that Mr Moldauer was employed by CBI, it would appear that, on Mr Moldauer’s contention, the severance agreement, into which he entered, at a time when he was represented by a lawyer, operated on a nonexistent subject matter and was therefore an ineffective and a futile exercise. In Australia, at least, the prospects of success on an application for equitable rectification of the severance agreement would appear to be strong.

6. Sometime after October 2002, criminal charges were brought against Mr Moldauer on a complaint made by Canandaigua Wine Company Incorporated that he had stolen trade secrets. The criminal charges were laid in California on 31 December 2002.  There is an extant warrant for Mr Moldauer’s arrest on those charges.

7. On 1 October 2004 Mr Moldauer commenced an arbitration with the American Arbitration Association claiming that CBI had wrongfully withheld his remuneration.  On 18 February 2005, on the application of CBI, the Supreme Court of the State of New York stayed the arbitration on the ground that the severance agreement barred Mr Moldauer’s claim.  An express provision of the severance agreement bars any claim by Mr Moldauer against Canandaigua Wine Company and its “affiliates” arising out of his employment.  The effect of that clause is reinforced by another clause of the severance agreement which speaks of Mr Moldauer violating the agreement if he were to sue the company or persons “associated” with the company.

8. CBI contends that even if, contrary to its submissions, the ‘Canandaigua Wine Company’ refers to Canandaigua Wine Company Inc, the severance agreement bars any actions against CBI because CBI is an affiliate of the Canandaigua Wine Company - or perhaps also because it is associated with the Canandaigua Wine Company.  On the other hand, Mr Moldauer contends that the word ‘affiliate’ is a term of art meaning, in New York, a subsidiary, and not a parent company. He has told me from the bar table that his case is that CBI is a parent company, not a subsidiary of Canandaigua Wine Company.

9. On 3 July 2012 CBI brought an application that Mr Moldauer’s action in this Court be permanently stayed, which stay was granted by the Master.  The Master applied the test established in Voth v Manildra Flour Mills Pty Ltd.[1]  The Master correctly addressed the question as to whether this Court is a clearly inappropriate forum for the determination of the dispute. That test focuses on the advantages and disadvantages arising from a continuation of the proceedings in the selected forum rather than on a comparative evaluation of the suitability of the two forums.  The considerations relating to the suitability of the alternative forum are nonetheless relevant considerations. In those cases in which the ascertainment of the natural forum is a complex and finely balanced question the court in which the proceedings have been brought may readily conclude that it is not a clearly inappropriate forum.

   [1] (1991) 171 CLR 538.

10. The High Court in Voth affirmed that the considerations identified by Goff J in Spiliada Maritime Corporation v Cansulex Ltd[2] continued to inform the clearly inappropriate forum test.  It is necessary to consider the connecting factors between the subject matter of the dispute and the competing forums. Those factors include not only factors affecting convenience or expense (such as availability of witnesses), but also other considerations such as the law governing the relevant transaction and the places where the parties reside and carry on business.  I turn now to a consideration of the connecting factors in this case.

    [2] [1987] AC 460.

11. Mr Moldauer resides in Seaford, Victoria. CBI is a foreign company registered under the Corporations Act 2001 (Cth), having a registered office and agent in South Australia. It has significant shareholdings in other companies in Australia, but does not conduct business in this country.

12. The defence in this matter is, on its face, a preliminary one calculated to raise the question of the inappropriateness of this Court as the forum to resolve the dispute.  The ambit of the controversy between the parties in this action must be assessed on the Statement of Claim and on the generality of material before the Court. Little weight can be given to the possibility that issues will be narrowed over time.[3]  The Master in my view correctly proceeded on the basis that the issues I set out below were likely to arise at a trial of the action.

    [3]    McGregor vPotts (2005) 68 NSWLR 109 at [51], [68].

13. The first issue identified is whether CBI was a party to the severance agreement. That question will involve a consideration of the law of New York as to the meaning of the word affiliate. It will also require a consideration of the use of the name “Canandaigua Wine Company” by CBI and Canandaigua Wine Company Inc in documents generally at about the time the severance agreement was made and in documents seen by Mr Moldauer in particular.  Discovery of documents held in the United States will be an important process in eliciting evidence on this factual question.  Resolution of the question will also most likely involve testimony from witnesses who reside in the United States about the circumstances in which the severance agreement was entered into.

14. The second issue concerns the effectiveness of the severance agreement.  The question is whether the decision of the Supreme Court of New York on the construction of the severance agreement binds the parties. That question will also be determined by the law of New York.  If the action were to be heard in this Court expert evidence would be required on the content of the common law of the State of New York and the extent to which common law principles have been supplanted by legislation. It is no longer possible to assume that there is a large degree of commonality between common law of jurisdictions which share the English common law tradition.

15. Assuming the action is not barred by the severance agreement the merits of the alleged termination of Mr Moldauer’s employment either by way of the severance agreement or for misconduct will need to be examined.  That is the third issue.  A determination of the third issue will require testimony from witnesses who probably continue to reside in the United States.

16. Whether Mr Moldauer’s employment was terminated because he was a whistleblower is a subsidiary question that is likely to arise as part of the third issue.  Again most of the witnesses are more likely to reside in the United States than in Australia. It is likely that on this question too, the discovery of internal CBI and Canandaigua Wine Company Incorporated documents which are held in the United States will be important.

17. Whether Mr Moldauer has been ready, willing and able to perform his duties since October 2002 until judgment is the fourth issue.  The fourth issue raises, as a question of fact, whether any inability or unavailability was due to Mr Moldauer’s offending, or the reasonable conduct of police authorities investigating the alleged offending on the one hand, or whether it is the result of the fabrication of charges by Canandaigua Wine Company Incorporated.  

18. The third and fourth issues will turn on the law of California, if Californian law is attracted by the choice of law rules of New York, or alternatively will depend on the employment laws of New York. Again, expert evidence will be required both as to the choice of law rules of the State of New York and the content of the substantive employment laws of the State of California and New York. I repeat my earlier observation that it is no longer possible to assume that there will be a large degree of commonality in the content of the common law of employment as between Australia and either of the two possibly applicable State jurisdictions of the United States.

19. The above factors lead inexorably to the conclusion that this Court is a clearly inappropriate forum. The position will not be much ameliorated by audio visual technology.  CBI is entitled to take the position that its witnesses on the complex and disputed questions of fact to which I have referred should be present so that their testimony might be assessed in open court.

20. Mr Moldauer submits that in assessing whether this Court is clearly an appropriate forum I should take into account his personal difficulties in litigating in the United States.  He has referred to the cost that he would face in maintaining an action in New York.  I accept that bringing proceedings in New York would be costly.  Unless he is a man of unusually wealthy means he will find it difficult to maintain an action in New York.

21. However, the questions of inconvenience cannot be decided from the perspective of one party alone.  The overall cost of the proceedings has much greater weight.  In my view the cost of litigating, in Australia, the factual disputes identified by the Master when so many of the witnesses, indeed probably all of them except Mr Moldauer, reside in the United States would be oppressive.

22. The overall increase in costs of the proceedings is more important than the cost to just one of the parties.  After all if Mr Moldauer fails in his action he will bear the costs of the proceedings, or at least an order might be made against him for those costs.  In that event, Mr Moldauer would carry the inflated costs burden.  Or perhaps, and this may more probably be the case, I do not know enough about Mr Moldauer’s means to be sure, CBI will be left without recourse for the extraordinary high costs of litigating in this Court.

23. Mr Moldauer also emphasises his concern about the existence of the warrant for his arrest to which I earlier referred. I agree with the Master that that is not, in itself, a weighty reason for finding that this Court is a clearly inappropriate forum.  To give that factor substantial weight would be to focus attention on the inappropriateness of the New York courts, instead of the proper question, which is the inappropriateness of this Court. Moreover, in my view it would be inconsistent with considerations of international comity and depart from the clearly inappropriate test to hear proceedings in this Court in order to allow a litigant to evade the criminal process of another country. At the very least in my view this Court should not do so when the other country is internationally recognised as a democratically governed nation subject to the rule of law.[4]

    [4]    Garsec v His Majesty The Sultan of Brunei & Anor (2007) 213 FLR 331 at [130] per McDougall J.

24. CBI puts the alternative contention before me, as it did before the Master, that the severance agreement gave the courts of New York exclusive jurisdiction.  The severance agreement expressly provides that the agreement shall be governed and construed by the laws of the State of New York and that the parties consent to the jurisdiction and venue of the State and Federal Courts located in Rochester, New York.  The Master did not rule on CBI’s contention and stayed the action on the sole ground that CBI had shown that this Court is clearly an inappropriate forum for this action to proceed. As I have indicated I would uphold the master’s decision in that respect.

25. I am not persuaded by CBI’s alternative contention.  In my view it is at least arguable that the jurisdiction clause was inserted in anticipation of a possible objection to the jurisdiction of the courts of New York on the grounds that the employment contract was one made in California.  Importantly, the clause does not provide that all, or any, legal controversies must, or shall, be submitted to the courts of the State of New York for adjudication.[5]

    [5]    Cf Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577 at 587 per Fullager J.

26. I have not had put before me material on the content of New York choice of law rules.  Nonetheless, on the face of things, the purpose of the clause is a plausible one.  If that be the purpose of the clause, the use of the definite article in the phrase “the place of trial for any action” is explicable because the clause does no more than provide that the parties consent to the jurisdiction of the courts of New York should one or other of them bring the proceedings in those courts.[6]

    [6]    FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association & Anor (1997) 41 NSWLR 117 at 126.

27. For the reasons I have given I would uphold the Master’s decision that this Court is a clearly inappropriate forum. It follows that the master’s costs order remains undisturbed.